Insurance Coverage for the Poor — Little Things Matter A Lot

The New York Times reports that NY State Medicaid recipients fail to re-enroll for health coverage due to “daunting paperwork and other obstacles.” We know that hyperbolic discounting means that immediate costs and hassles loom large relative to future benefits, so it’s no surprise that many eligible beneficiaries fail to re-enroll each year.

The 60 participants of the focus groups — all former recipients of public health insurance — said they valued the health insurance programs and had wanted to remain enrolled.

But many said they had recently lost coverage because they were daunted by the requirements for re-enrollment. After 9 or 10 months in the program, active participants are mailed a thick pink packet of paperwork that they must fill out and return. The state is supposed to send at least one reminder notice.

“It takes a lawyer to figure it out,” one person quoted in the report said of the packet.

David Laibson — who with his colleagues “cracked the code” on procrastination around participation in 401(k) plans — discovered that massive simplification, active choice, and resetting defaults (opt out vs. opt in) can significantly change enrollment rates.

The state has apparently been working on significantly streamlining the process; if Laibson’s experience translates to this setting, and if the simplification is significant, it should help quite a bit.